The risk of system financial collapse aside, the U.S. economy continues to deteriorate.
According to The New York Fed’s “Empire State” maunufacturing survey released today, the organization’s general business conditions index fell to minus 24.62 from minus 7.41 in September. Ouch.
Economists polled by Reuters—meanwhile—had been expecting a reading of minus 10.0. That was a huge miss that helped to send the market lower on the day. Moreover, the details in the report were hardly encouraging.
From the report:
“The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated significantly in October. The general business conditions index dropped 17 points to a record-low -24.6. The new orders index also fell to a record low, and the indexes for shipments, unfilled orders, and inventories all declined sharply. The prices paid index eased significantly, to its lowest level of the year, while the prices received index also fell, although less sharply. Employment indexes were negative. Future indexes declined markedly with exceptionally large declines in the future new orders and shipments indexes.”
But that wasn’t the only market headwind to kick up on the day. As expected, the latest consumer sales data was awful too.
Here’s the skinny on that score.
From Bloomberg by Bob Willis and Timothy R. Homan entitled: U.S. Economy: Retail Sales Slide Signals Deepening Recession
“The eroding U.S. economy drove retail sales into their longest slump in at least 16 years, even before this month’s market collapse signaled a deepening recession.
Consumer purchases fell 1.2 percent in September, extending the decline to three straight months, the first time that’s happened since comparable records began in 1992, Commerce Department figures showed today. In another sign of weakening demand, prices paid to U.S. producers fell last month on lower fuel costs.
September’s drop in retail sales was the largest since August 2005 and followed a 0.4 percent decline the prior month. Excluding autos, sales fell 0.6 percent. Both declines were more than economists had forecast.
The median forecast of 75 economists surveyed projected purchases would drop 0.7 percent following a previously reported 0.3 percent decline the prior month. Estimates ranged from a fall of 1.5 percent to a 0.1 percent gain. Sales excluding automobiles were forecast to drop 0.2 percent from the prior month, according to the survey median.
Eleven of the 13 main categories tracked by Commerce showed a drop in demand last month, led by a 3.8 percent slump at auto dealers
Sales are slowing just as merchants prepare for the holiday selling season, on which they depend for the largest share of their revenue. San Francisco Federal Reserve President Janet Yellen said yesterday the U.S. may already be in a recession, and stocks dropped amid concern that the government’s plans to inject capital into banks won’t halt the economy’s decline.
“I don’t think things can get much worse,” said Brian Bethune, chief financial economist at Global Insight Inc. in Lexington, Massachusetts. “September was a terrible month in terms of the overall situation, in both sales and production. The fourth quarter is guaranteed to be a terrible quarter.”
Again, keep in mind that consumer spending accounts for 72% of U.S. GDP. The recession, in other words, is already here.
In fact, it probably dates all the way back to Q4 of 2007.